What is homeowners insurance?
Homeowners insurance can help protect your home including the structure, the belongings inside, and the cost of medical expenses if someone is injured on your property. When you purchase a homeowners policy, you are buying “coverages”, which are the things your insurer agrees to pay for.
Your out-of-pocket costs
Your deductible, as it is stated in your policy, is the amount you will owe if your home is damaged or you file a claim. For example, if your deductible is $500 and lightning strikes your house, causing $10,000 in damage, you will pay your $500 deductible before your insurance company pays the remaining $9,500.
Unlike health insurance, your homeowners deductible applies for most claims, no matter how many you have per year.
How to choose the right deductible
Deductibles for a homeowners insurance policy typically range from $500 to $5,000.
The higher your deductible, the more you will have to pay before your insurance company pays. This means you will have a lower overall rate, but you will pay more out-of-pocket costs. Vice versa, if you have a lower deductible, you will have a higher rate but pay less out-of-pocket.
What is covered by homeowners insurance?*
Though it varies state to state, there are standard coverages that most states offer:
Dwelling coverage includes anything that is attached to your house, such as a garage, chimney, roof, cabinets, flooring, etc.
Other structures that may be covered by your policy include those not attached to your house, such as detached garages, sheds, fences, driveways, etc.
Personal property coverage covers your stuff if it is damaged or stolen. This includes things like your laptop stolen from your car or décor stolen from your front porch. Commonly covered belongings are:
There are limits per item with this type of protection that is calculated as a percentage of your total personal property coverage. If you have particularly expensive items, these may not be completely covered by your insurance. For example, if you have $150,000 in personal property coverage and the limit for any single item is 10%, you are covered up to $15,000 per item. If your $20,000 painting is destroyed, you would only receive a payment of $15,000, minus your deductible. If you have an expensive item, call your insurance company to add that item to your policy in a process called scheduling an item or adding a rider.
Temporary living expenses
If your home is uninhabitable due to a covered loss, loss of use coverage will pay for a hotel/rent expenses as well as food while you are displaced.
Personal liability coverage covers you in the event someone is injured on your property by your or if you or your family members on your policy damage another’s property. If you are sued, this coverage will pay for a lawyer and court fees. An example would be if your housekeeper trips on a rug because it was not properly secured and breaks his leg, personal liability coverage would pay for his injury.
Injuries on your property
This coverage will pay medical expenses in the event someone is injured on your property.
Do I need homeowners insurance?
Homeowners insurance is not legally required, but if you have or are getting a mortgage, your lender may require it. How much coverage you need will depend on the value of your home, property, and belongings inside. You will also want to consider how likely you are to have a claim.
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*This is only a general description of coverage and is coverage is subject to terms, provisions, exclusions, and conditions.